Posts Tagged ‘disruption’

Today’s WSJ has a book excerpt about the demise of RIM/Blackberry. It is a fascinating story but also has a core lesson for product managers (including myself) which is the lesson of “don’t forget all the parts move”.

While hindsight is always 20/20, when you are faced with a potentially disruptive situation you have to take a step back and revisit nearly all of your assumptions, foundational or peripheral, because whether you see it or not, they are all going to face intense reinvention.

In disruptive theory we always talk about the core concept that disruptive products are better in some things but worse in many of the things (tasks, use cases, features) that are currently in use by the incumbent product. This is the basis of the disruption itself. In reading the excerpt it is clear that out of the gate this reality was how the RIM executives chose to view the iPhone as introduced as targeting a different market segment or different use cases:

If the iPhone gained traction, RIM’s senior executives believed, it would be with consumers who cared more about YouTube and other Internet escapes than efficiency and security. RIM’s core business customers valued BlackBerry’s secure and efficient communication systems. Offering mobile access to broader Internet content, says Mr. Conlee, “was not a space where we parked our business.”

There’s a natural business reaction to want to see a new entrant through the lens of a subset of your existing market. Once you can do that you get more comfortable doing battle in a small way rather than head-on. You feel your market size will trump a “niche” player.

The problem is that such perspective assumes a static view of the market. You’re assuming that all the other attributes of your implementation will remain advantaged and the new competitor will fail to translate that single advantage into a broader attack.

What happens, almost all the time, in technology is that disruptive entrants gain ecosystem momentum. There’s a finite bandwidth in the best people (engineers, partners, channel) to improve, integrate, promote products. Once the new product appears compelling in some way then there’s a race to gain a perceived first mover advantage. Or said another way, the leaders of the old world were already established and so a new platform yields a new chance to a leader. There’s a mad dash to execute whether you’re building leather cases, integrating line of business systems, or selling the product.

When I read that first quote, I thought how crazy to think that the rest of the internet, which includes email and messaging, would not race to try to establish new leadership in the space. The assumption that everyone is sitting still is flawed. Or just as likely, many of those incumbents will choose to assume their small part of the blackberry world will move ahead unscathed.

In a platform transition, everything is up for grabs. If you’re the platform you have to change everything and not just a few little things. First, no matter what you do the change is still going to happen. It means that you don’t have the option of doing nothing. Once a new platform gains momentum and you start losing your partners (of all kinds) or can no longer attract the top talent to the platform you have seen the warning sign and so has everyone else.

As Blackberry learned, you can’t take the path of trying to just change a few things and hope that taking what you perceive as the one missing piece and adding it to your platform will make the competitor go away. You can see how this worked in the example of the Storm device introduction, which aimed to add a bigger screen while maintaining the Blackberry keyboard feel. In other words, the perception was that it was the screen that was the thing that differentiated the device.

The browser was painfully slow, the clickable screen didn’t respond well in the corners and the device often froze and reset. Like most tech companies launching a glitchy product, RIM played for time. Verizon stoked sales with heavy subsidies, while RIM’s engineers raced to introduce software upgrades to eliminate Storm’s many bugs. “It was the best-selling initial product we ever had,” says Mr. Lazaridis, with 1 million devices sold in the first two months. “We couldn’t meet demand.”

Storm’s success was fleeting. By the time Mr. Balsillie was summoned to Verizon’s Basking Ridge, N.J., headquarters in the spring of 2009 to review the carrier’s sales data, RIM’s senior executives knew Storm was a wipeout. Virtually every one of the 1 million Storm phones shipped in 2008 needed replacing, Verizon’s chief marketing officer, John Stratton, told Mr. Balsillie. Many of the replacements were being returned as well. Storm was a complete failure, and Mr. Stratton wanted RIM to pay.

Of course we know now that there were many more elements of the iPhone that changed and it was no single feature or attribute. Every platform shift involves two steps:

Introduction of a new platform that does some new things but does many existing things in a suboptimal way.

Evolution of the new platform to achieve all those old scenarios but in new ways that often look like “hey we had that back then”. For example, consider the rise of secure messaging, mobile device management, and new implementations of email. All of these could be viewed as “Blackberry features” just done in a totally different way.

That’s why all the parts are moving, because everything you ever did will get revisited in a new context with a new implementation even if it (a) means the use case goes unanswered for a while and (b) the execution ends up being slightly different.

On a personal note, I was a Blackberry user from the earliest days (because our team made Outlook and the initial Blackberry was a client-side integration). When I saw the iPhone I was one of those people fixated on the keyboard. I was certain it would fail because I couldn’t peck out emails as fast as I could on Blackberry. In fact, I even remember talking about how Windows phones at the time had touchscreens so if that became popular we would have that as well. That summer, I waited on line to pick up my iPhone and was convinced of the future in just a few minutes.

You would have thought I would have been prepared. Previously, I had experienced a similar lesson. I had yet to be convinced of the utility of the internet on a phone, which the iPhone too solved. Of course my lens was clouded by the execution of the phones I used most (Blackberry and Windows) and the fact that the internet didn’t want to work on small screens and without Flash. I would visit Japan several times a year and see the DoCoMo i-mode phones and was a big skeptic—my friends from Japan still make fun of me for not seeing the future (by the way, at that time SMS had yet to even gain traction in the US and friends from Europe found that mysterious). What I failed to recognize was that in the i-mode implementation a full ecosystem solved the problem by moving all the parts around. Of course i-mode got disrupted when the whole of the internet moved to mobile. So perhaps it wasn’t just me. No matter what happens, someone always said it would. But saying it would happen and acting are very different things. Though I do recall many exchanges with Blackberry execs trying to convince them to have a great browser once I used the iPhone.

The lesson always comes back to underestimating the power of ecosystem momentum and the desire and ability of new players to do new things on a new platform.

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The “Internet of Things” or IoT is cool. I know this because everyone tells everyone else how cool it is. Ask anyone and they will give you their own definition of what IoT means and why it is cool. That’s proof we are using a buzzword or are in a hype-cycle.

Much is at stake to benefit from, contribute to, or even control this next, next-generation of computing. If a company benefitted from 300 million PCs a year, that’s quite cool. If another company benefitted from 1 billion smartphones a year, then that’s pretty cool.

You know what is really cool, benefitting from 75 billion devices. That certainly explains the enthusiasm for the catch phrase.

Missing out on this wave is uncool. Just take a look at the CNBC screen shot to the left. That’s what we talked about in the Digital Innovation class at HBS last week and what motivated this post.

In an effort to quantify the opportunity, claim leadership, or just be included amongst those who “get it” we are all collectively missing the fact that we really don’t know how this will play out in any micro sense. It is safe to say everything will be connected to the internet. That’s about it. As Benedict Evans says, counting connected devices is a lot like counting how many electric motors are in your home. In the first days this was cool. Today, that seems silly. Benedict’s excellent post also goes into details asking many good questions about what being connected might mean and here I enhance our in-class discussion.

One way to view the history of “devices” is through two generations in the 20th century. For the first 50 years we had “analog motor” devices that replaced manual mechanical devices. This was the age of convenience brought by motors of all kinds from giant gas motors that produced electricity to tiny DC motors that powered household gadgets and everything in between. People very quickly learned the benefits of using motors to enhance manual effort. Though if you don’t think it was a generational shift, consider the reactions to the first labor saving home appliances (see Disney’s Carousel of Progress).

The next 50 years was about “digital electronics” which began with the diode, then the transistor, and then the microprocessor. What is amazing about this transition is how many decades past before the full transformation took place. Early on electronics replaced analog variants. Often these were viewed as luxuries at best, or inferior “gadgets” at worse. I recall my father debating with a car dealer the merits of “electronic fuel injection”. Many of us reading this certainly recall (or still believe) the debate over the quality of digital music relative to analog LP and cassette. Interestingly, the benefit we all experience today of size, weight, power consumption, portability, and more took years to gain acceptance. We used to think about “repairing” a VCR and how awful it was that you could not repair a DVD player. Go figure. The key innovation insight is that the benefits of electronics took decades to play out and were not readily apparent to all at the start.

We find ourselves at the start of a generation of invention where everything is connected. We are at the early stages where we are connecting things that we can connect, just like we added motors to replace the human turning the crank on a knitting loom. Some inventions have the magic of the portable radio—freedom and portability. Some seem as gimmicky as that blender.

Here are a few things we all know and love today that have already been transformed by “first generation” connectivity:

For the next few years, thousands of innovators will embark on the idea maze (Chris Dixon summarizes Balaji Srinivasan’s lecture). This is not just about product-market fit, but about much more basic questions. Every generational change in technology introduces a phase of crazy inventing, and that is where we are today with IoT.

This means that for the next couple of years most every product or invention, at first glance, might seem super cool (to some) and crazy to most everyone else. Then after a little use or analysis, more sober minds will prevail. The journey through the idea maze and engineering realities will continue.

This also means that every “thing” introduced will be met with skepticism of the broader, less tech-enthused, market (like our diverse classroom). Every introduction will seem more expensive, more complex, more superfluous than what is currently in use. In fact it is likely that even the ancillary benefits of being connected will be lost on most everyone.

That almost reads like the definition of innovator’s dilemma. Nothing sums this up more than how people talk about smart “watches”, connected thermostats, or robots. One either immediately sees the utility of strapping to your wrist a sub-optimal smartphone you have to charge midday or you ask why you can’t just look at your phone’s lock screen for the time. One looks at Nest thermostat and asks why paying 10X for the luxury of having a professional HVAC installer get stumped or having to “train” something you set and forget is such a good idea.

We find ourselves in the midst of a generational change in the technology base upon which everything is built. It used to be that owning an “electric” or “electronic” thing sounded modern and cool, well because they were so unique. That’s why adding “connected” or “smart” to a product is going to sound about as silly as saying “transistor radio” or “electronic oven”.

Every thing will be connected. The thing is we, collectively, have neither mastered connecting a thing without some downside (cost, weight, complexity) nor even figured out what we would do when something is connected. What are the equivalents of size, weight, reliability, ease of manufacturing, and more when it comes to connectivity? Today we do the “obvious” such as use the cloud for remote relay, access, storage. We write an app to control something over WiFi rather than build in a physical user interface. We collect and analyze data to inform usage or future products. There is more to come. How will devices be connected to each other? How will third parties improve the usage of things and just make them better? Where do we put the “smarts” in a thing when we have thousands of things? How might we find we are safer, healthier, faster, and even just happier?

We just don’t know yet. What we do know is that a lot of entrepreneurs and innovators across companies are going to try things out and incrementally get us to a new connected world, which in a few years will just be the world.

The Internet of Things is not about the things or even the platform the same way we thought about motors or microprocessors. The big winners in IoT will be thinking about an entirely different future, not just connecting to things we already use today in ways we already use them.

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Companies often pay very close attention to new products from startups as they launched and ponder their impact on their scale, mainstream work. Almost all of the time the competitive risk was deemed minimal. Then one day the impact is significant.

In fact up until such a point most pundits and observers likely said that the startup will get overrun or crushed by a big company in the adjacent space. By this time it is often too late for the incumbent and what was a product challenge now looks like an opportunity to take on the challenges of venture integration.

Why is this dynamic so often repeated? Why does the advantage tilt to startups when it comes to innovation, particularly innovation that disrupts the traditional category definition or go to market of a product?

Much of the challenge described here is rooted in how we discuss technology disruption. Incumbents are faced with “disruption” on a daily basis and from all constituencies. To a great degree as an incumbent the sky is always falling. For every product that truly disrupts there are likely hundreds of products, technologies, marketing campaigns, pricing strategies and more that some were certain would be last straw for an incumbent.

Because statistically new ideas are not likely to disrupt and new companies are likely to fail, incumbents become experts at defining away the challenges and risks posed by a new entrant into the market. Incumbents view the risk of wild swings in strategy or execution as much higher risk than odds of a 1 in 100 chance a new technology upending the near term business. Factoring in any reasonable timeline and the incumbent has every incentive to side with statistics.

To answer “why startups aren’t features” this post looks at the three elements of a startup that competes with an incumbent: incumbent’s reaction, challenges faced by the incumbent, and the advantages of the startup.

Reaction

When a startup enters a space thought (by the incumbent or conventional wisdom) to be occupied by an incumbent there are series of reasonably predictable reactions that take place. The more entrenched the incumbent the more reasoned and bullet proof the logic appears to be. Remember, most technologies fail to take hold and most startups don’t grow into significant competitors. I’ve personally reacted to this situation as both a startup and as the incumbent.

Doesn’t solve a problem customers have. The first reaction is to just declare a product as not solving a customer problem. This is sort of the ultimate “in the bubble” reaction because the reality is that the incumbent’s existing customers almost certainly don’t have the specific problem being solved because they too live in the very same context. In a world where enterprises were comfortable sending PPT/PDFs over dedicated lines to replicated file servers, web technologies didn’t solve a problem anyone had (this is a real example I experienced in evangelizing web technology).

Just a feature. The first reaction to most startups is that whatever is being done is a feature of an existing product. Perhaps the most famous of all of these was Steve Jobs declaring Dropbox to be “a feature not a product”. Across the spectrum from enterprise to consumer this reaction is routine. Every major communication service, for example, enabled the exchange of photos (AIM, Messenger, MMS, Facebook, and more). Yet, from Instagram to Snapchat some incredibly innovative and valuable startups have been created that to some do nothing more than slight variations in sharing photos. In collaboration, email, app development, storage and more enterprise startups continue to innovate in ways that solve problems in uniquely valuable ways all while incumbents feel like they “already do that”. So while something might be a feature of an existing product, it is almost certainly not a feature exactly like one in an existing product or likely to become one.

Only a month’s work. One asset incumbents have is an existing engineering infrastructure and user experience. So when a new “feature” becomes interesting in the marketplace and discussions turn to “getting something done” the conclusion is usually that the work is about a month. Often this is based on estimate for how much effort the startup put into the work. However, the incumbent has all sorts of constraints that turn that month into many months: globalization, code reviews, security audits, training customer support, developing marketing plans, enterprise customer roadmaps, not to mention all the coordination and scheduling adjustments. On top of all of that, we all know that it is far easier to add a new feature to a new code base than to add something to a large and complex code base. So rarely is something a month’s work in reality.

Challenges

One thing worth doing as a startup (or as a customer of an incumbent) is considering why the challenges continue even if the incumbent spins up an effort to compete.

Just one feature. If you take at face value that the startup is doing just a feature then it is almost certainly the case that it will be packaged and communicated as such. The feature will get implemented as an add-on, an extra click or checkbox, and communicated to customers as part of the existing materials. In other words, the feature is an objection handler.

Takes a long time to integrate. At the enterprise level, the most critical part of any new feature or innovation is how it integrates with existing efforts. In that regard, the early feedback about the execution will always push for more integration with existing solutions. This will slow down the release of the efforts and tend to pile on more and more engineering work that is outside the domain of what the competitor is doing.

Doesn’t fit with broad value proposition. The other side of “just one feature” is that the go to market execution sees the new feature as somehow conflicting with the existing value proposition. This means that while people seem to be seeing great value in a solution the very existence of the solution runs counter to the core value proposition of the existing products. If you think about all those photo sharing applications, the whole idea was to collect all your photos, enable you to later share them or order prints or mugs. Along comes disappearing photos and that doesn’t fit at all with what you do. At the enterprise level, consider how the enterprise world was all about compliance and containing information while faced with file sharing that is all about beyond the firewall. Faced with reconciling these positioning elements, the incumbent will choose to sell against the startup’s scenario rather than embrace it.

Advantages

Startups also have some advantages in this dynamic that are readily exploitable. Most of the time when a new idea is taking hold one can see how the startup is maximizing the value they bring along one of these dimensions.

Depth versus breadth. Because the incumbent often views something new as a feature of an existing product, the startup has an opportunity to innovate much more deeply in the space. In any scenario becomes interesting, the flywheel of innovation that comes from usage creates many opportunities to improve the scenario. So while the early days might look like a feature, a startup is committed to the full depth of a scenario and only that scenario. They don’t have any pressure to maintain something that already exists or spend energy elsewhere. In a world where customers want the app to offer a full stack solution or expect a tool to complete the scenario without integrating something else, this turns out to be a huge advantage.

Single release effort. The startup is focused on one line of development. There’s no coordination, no schedules to align, no longer term marketing plans to reconcile and so on. Incumbents will often try to change plans but more often than not the reactions are in whitepapers (for enterprise) or beta releases (for consumer). While it might seem obvious, this is where the clarity, focus, and scale of the startup can be most advantageous.

Clear and recognizable value proposition/identity. The biggest challenge incumbents face when adding a new capability to their product/product line is where to put it so it will get noticed. There’s already enormous surface area in the product, the marketing, and also in the business/pricing. Even the basics of telling customers that you’ve done something new is difficult and calling attention to a specific feature it often ends up as a supporting point on the third pillar. Ironically, those arguing to compete more directly are often faced with internal pressures that amount to “don’t validate the competitor that much”. This means even if the feature exists in the incumbent’s product, it is probably really difficult to know that and equally difficult to find. The startup perspective is that the company comes to stand for the entire end-to-end scenario and over time when customers’ needs turn to that feature or scenario, there is total clarity in where to get the app or service.

Even with all of these challenges, this dynamic continues: initially dismissing startup products, later attempting to build what they do, and in general difficulty in reacting to inherent advantages of a startup. One needs to look long and hard for a story where an incumbent organically competed and won against a startup in a category or feature area.

Secret Weapon

More often than not the new categories of products come about because there is a change in the computing landscape at a fundamental level. This change can be the business model, for example the change to software as a service. It could also be the architecture, such as a move to cloud. There could also be a discontinuity in the core computing platform, such as the switch to graphical interface, the web, or mobile.

There’s a more subtle change which is when an underlying technology change is simply too difficult for incumbents to do in an additive fashion. The best way to think about this is if an incumbent has products in many spaces but a new product arises that contains a little bit of two of the incumbent’s products. In order to effectively compete, the incumbent first must go through a process of deciding which team takes the lead in competing. Then they must address innovator’s dilemma challenges and allocate resources in this new area. Then they must execute both the technology plans and go to market plans. While all of this is happening, the startup unburdened by any of these races ahead creating a more robust and full featured solution.

At first this might seem a bit crazy. As you think about it though, modern software is almost always a combination of widely reused elements: messaging, communicating, editing, rendering, photos, identity, storage, API / customization, payments, markets, and so on. Most new products represent bundles or mash-ups of these ingredients. The secret sauce is the precise choice of elements and of course the execution. Few startups choose to compete head-on with existing products. As we know, the next big thing is not a reimplementation of the current big thing.

The secret weapon in startups competing with large scale incumbents is to create a product that spans the engineering organization, takes a counter-intuitive architectural approach, or lands in the middle of the different elements of a go to market strategy. While it might sound like a master plan to do this on purpose, it is amazing how often entrepreneurs simply see the need for new products as a blending of existing solutions, a revisiting of legacy architectural assumptions, and/or emphasis on different parts of the solution.

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Cycle of nature of work, capabilities of tools, architecture of platform.

Are tablets the next big thing, a saturated market (already), dead (!), or just in a lull? The debate continues while the sales of tablets continue to outpace laptops and will soon overtake all PCs (of all form factors and OS). What is really going on is an architectural transformation—the architecture that defined the PC is being eclipsed by the mobile OS architecture.

The controversy of this dynamic rests with the disruptive nature—the things that were easy to do with a PC architecture that are hard or impossible to do with a mobile OS, as well as the things in a mobile OS that make traditional PCs seem much easier. Legacy app compatibility, software required for whole professions, input preferences, peripherals, and more are all part of this. All of these are also rapidly changing as software evolves, scenarios adapt, and with that what is really important changes.

Previous posts have discussed the changing nature of work and the new capabilities of tools. This post details the architecture of the platform. Together these three form an innovation cycle—each feeding into and from each other, driving the overall change in the computing landscape we see today.

The fundamental shift in the OS is really key to all of this. For all the discussed negatives the mobile OS architecture brings to the near term, it is also an essential and inescapable transition. Often during these transitions we focus in the near term on the visible differences and miss the underlying nature of the change.

During the transition from mini to PC, the low price and low performance created a price/performance gap that the minis thought they would exploit. Yet the scale volume, architectural openness, and rapid improvement in multi-vendor tools (and more) contributed to a rapid acceleration that could not compare.

During the transition from character-based to GUI-based PCs many focused on the expense of extra peripherals such as graphics cards and mice, requirement for more memory and MIPs, not to mention the performance implications of the new interface in terms of training and productivity. Yet, Moore’s law, far more robust peripheral support (printers and drivers), and ability to draw on multi-app scenarios (clipboard and more) transformed computing in ways character-based could not.

The same could be said about the transition to internetworking with browsers. The point is that the ancillary benefits of these architectural transitions are often overlooked while the dialog primarily focuses on the immediate and visible changes in the platform and experience. Sometimes the changes are mitigated over time (i.e. adding keyboard shortcuts to GUI or the evolution of the PC to long file names and real multi-tasking and virtual memory). Other times the changes become the new paradigm as new customers and new scenarios dominate (i.e. mouse, color, networking).

The transition to the mobile OS platforms is following this same pattern. For all the debates about touch versus keyboard, screen-size, vertical integration, or full-screen apps, there are fundamental shifts in the underlying implementation of the operating system that are here to stay and have transformed computing.

We are fortunate during this transition because we first experienced this with phones that we all love and use (more than any other device) so the changes are less of a disconnect with existing behavior, but that doesn’t reduce the challenge for some or even the debate.

Mobile OS paradigm

The mobile OS as defined by Android, iOS, Windows RT, Chrome OS, Windows Phone, and others is a very different architecture from the PC as envisioned by Windows 7/8, Mac OS X, Linux desktop. The paradigm includes a number of key innovations that when taken together define the new paradigm.

ARM. ARM architecture for mobile provides a different view of the “processor”: SoC, multi-vendor, simpler, lower power consumption, fanless, rich graphics, connectivity, sensors, and more. All of these are packaged in a much lower cost way. I am decidedly not singling out Intel/AMD about this change, but the product is fundamentally different than even Intel’s SoCs and business approach. ARM is also incompatible with x86 instructions which means, even virtualized, the existing base of software does not run, which turns out to be an asset during this change (the way OS/360 and VMS didn’t run on PCs).

Security. At the heart of mobile is a more secure platform. It is not more secure because there are few pointers in the implementation or fewer APIs, but more secure because apps run with a different notion of what they can/cannot do and there is simply no way to get apps on the device that can violate those rules (other than for developers of course). There’s a full kernel there but you cannot just write your own kernel mode drivers to do whatever you want. Security is a race of course and so more socially engineered, password stealing, packet sniffing, phone home evil apps will no doubt make their way to mobile but you won’t see drive by buffer overrun attacks take over your device, keystroke loggers, or apps that steal other apps’ data.

Quality over time and telemetry. We are all familiar with the way PCs (and to a lesser but non-zero degree Macs) decay over time or get into states where only a reformat or re-imaging will do. Fragility of the PC architecture in this regard is directly correlated with the openness and so very hard to defend against, even among the most diligent enthusiasts (myself included). The mobile OS is designed from the ground up with a level of isolation between the OS and apps and between apps that all but guarantee the device will continue to run and perform the way it did on the first day. When performance does take a turn for the worse, there’s ongoing telemetry that can easily point to the errant/causal app and removing it returns things to that baseline level of excellence.

App store model. The app store model provides for both a full catalog of apps easily searched and a known/reviewed source of apps that adhere to some (vendor-specified) level of standards. While vendors are taking different approaches to the level of consistency and enforcement, it is fair to say this approach offers so many advantages. Even in the event of a failure of the review/approval process, apps can be revoked if they prove to be malicious in intent or fixed if there was an engineering mistake. In addition, the centralized reviews provide a level of app telemetry that has previously not existed. For developers and consumers, the uniform terms and licensing of apps and business models are significant improvements (though they come with changes in how things operate).

All day battery life. All day battery life has been a goal of devices since the first portable/battery PCs. The power draw of x86 chipsets (including controllers and memory), the reliability challenges of standby power cycles, and more have made this incredibly difficult to reliably “add on” to the open PC architecture. Because of the need for device drivers, security software, and more the likelihood that a single install or peripheral will dramatically change the power profile of a traditional device is commonplace. The “closed” nature of a mobile OS along with the process/app model make it possible to have all day battery life regardless of what is thrown at it.

Always connected. A modern mobile OS is designed to be always connected to a variety of networks, most importantly the WWAN. This is a capability from the chipset through the OS. This connectivity is not just an alternative for networking, but built into the assumptions of the networking stack, the process model, the app model, and the user model. It is ironic that the PC architecture which had optional connectivity is still less good at dealing with intermittent connectivity than mobile which has always been less consistent than LAN or wifi. The need to handle the constant change in connectivity drove a different architecture. In addition, the ability to run with essentially no power draw and screen off while “waking up” instantly for inbound traffic is a core capability.

Always up to date apps/OS. Today’s PC OSes all have updaters and connectivity to repositories from their vendors, but from the start the modern mobile OS is designed to be constantly updated at both the app and OS from one central location (even if the two updates are handled differently). We are in a little bit of an intermediate state because on PCs there are some apps (like Chrome and Firefox, and security patches on Windows) that update without prompts by default yet on mobile we still see some notifications for action. I suspect in short order we will see uniform and seamless, but transparent, updates.

Cloud-centric/stateless. For decades people have had all sorts of tricks to try to maintain a stateless PC: the “M” drive, data drives or partitions, roaming profiles, boot from server, VM or VDI, even routine re-imaging, etc. None of these worked reliably and all had the same core problem, which was that whatever could go wrong if you weren’t running them could still go wrong and then you’re one good copy was broken everywhere. The mobile OS is designed from the start to have state and data in the cloud and given the isolation, separation, and kernel architecture you can reliably restore your device often in minutes.

Touch. Touch is the clearly the most visible and most challenging transition. Designing the core of the OS and app model for touch first but with support for keyboards has fundamentally altered the nature of how we expect to interact with devices. No one can dispute that for existing workloads on existing software that mouse and keyboard are superior and will remain so (just as we saw in the transition from mainframe to mini, CUI to GUI, client/server to web, etc.) However, as the base of software and users grows, the reality is that things will change—work will change, apps will change, and thus work products will change, such that touch-first will continue to rise. My vote is that the modern “laptop” for business will continue to be large screen tablets with keyboards (just as the original iPad indicated). The above value propositions matter even more to todays mobile information worker as evidenced by the typical airport waiting area or hotel lobby lounge. I remain certain that innovation will continue to fill in the holes that currently exist in the mobile OS and tablets when it comes to keyboards. Software will continue to evolve and change the nature of precision pointing making it only something you need for PC only scenarios.

Enterprise management. Even in the most tightly managed environment, the business PC demonstrates the challenges of the architecture. Enterprise control on a mobile OS is designed to be a state management system, not a compute based approach. When you use a managed mobile device, enterprise management is about controlling access to the device and some set of capabilities (policies), but not about running arbitrary code and consuming arbitrary system resources. The notion that you might type your PIN or password to your mobile device and initiate a full scan of your storage and install an arbitrary amount of software before you can answer a call is not something we will see on a modern mobile OS. So many of the previous items in the list have been seen as challenges by enterprise IT and somewhat ironically the tools developed to diagnose and mitigate them have only deepened the challenges for the PC. With mobile storage deeply encrypted, VPN access to enterprise resources, and cloud data that never lands on your device there are new ways to think of “device management”.

Each of these are fundamental to the shift to the mobile OS. Many other platform features are also significantly improved such as accessibility, global language support, even the clipboard and printing.

What is important about these is how much of a break from the traditional PC model they are. It isn’t any one of these as much as the sum total that one must look at in terms of the transition.

Once one internalizes all these moving parts, it becomes clear why the emphasis on the newly architected OS and the break from past software and hardware is essential to deliver the benefits. These benefits are now what has come to be expected from a computing device.

While a person new to computing this year might totally understand a large screen device with a keyboard for some tasks, it is not likely that it would make much sense to have to reboot, re-image, or edit the registry to remove malware, or why a device goes from x hours of battery life to 1/2 x hours just because some new app was installed. At some point the base expectations of a device change.

The mobile OS platforms we see today represent a new paradigm. This new paradigm is why you can have a super computer in your pocket or access to millions of apps that together “just work”.

Attending the <code/conference> (#codecon) this past week turned out to be a remarkable experience, even more remarkable than I expected. The generational shift in our computing experience from desktop to mobile, from software to services, and from hundreds of millions to trillions was on display through the interviews with a dozen industry CEOs.

This post will explore this generational change through the speakers at the conference. Before diving into the details of each session, we will explore this change and the implicit context.

Generational Change

Reflecting on the interviews and demonstrations as well as the “lobby chatter” is a key part of learning by attending. I’ve always viewed this conference and predecessor D Conference as the most relevant conferences for learning about the strategic drivers of our industry. You can read my report from last year here. Writing these reports is part of the learning for me and reading the old reports lets me checkpoint on my own learning and journey.

If you move beyond the insights from any single speaker or the announcements at the event (all were widely reported by re/code and others and new this year by re/code partner CNBC), one theme just keeps coming back to me—the vast difference in tone and content between the incumbents and the challengers, between legacy and disruptors, between the old guard and the new, or whatever labels you want to use. We talk all the time about the transition of our industry from one era to another (and don’t forget the term “post-PC” was first used in this very forum) and the conference provides a microcosm expressed through leaders of these transitions taking place.

There is a vast difference in tone and content between the incumbents and the challengers, between legacy and disruptors, between the old guard and the new.

The transition is in full force. This does not mean by definition that all existing companies will lose and only new companies will win. Quite the contrary, the fact that these changes are now visible to all makes the creation, purchase, and use of new products and technologies evidence of the transition, as well as opportunity to create new plans and adjust. The mobile internet is causing the transition but also making the communication of that very transition much more transparent, which is unlike the progressive unveiling that characterized the mainframe to mini to PC transition.

Are the new companies doing enough to transition customers as well as their own business to new paradigms? How much should new companies bridge from existing solutions or should they expect a wholesale change from customers? Is there an understanding of the existing complexities of the real world?

Are the incumbents changing enough to build new products and business that reflect the new generation? Are they trying too much to “thread the needle” and incrementally step to a new context by maintaining status quo or “repotting the plants”? Is there an understanding of the complexities of existing solutions?

The puts this "generational" change out there for us to experience through the always challenging, yet always consistently even-handed questioning (interrogation) from Walt and Kara (and a great addition this year were interviews featuring seasoned members of the re/code team).

Context (is everything in business)

The attendees (in the audience) are people who have worked in the industry often times since the earliest days. The interviewers are professionals who cover deeply the industry and the subjects. It is hard to imagine creating a more informed or tougher environment. That’s the challenge.

Yet, industry leaders both line up and are obliged to appear (for the most part). Because the environment is so challenging and widely covered, leaders gain a great deal of credibility by standing up to the challenge.

Leaders gain a great deal of credibility by standing up to the challenge of appearing.

The conference takes place the same time every year, whether a company has something to announce or not. For example, last year attendees were frustrated because Apple’s Tim Cook did not announce anything. This is an unfair way to look at the “performance” of a participant. This conference has an amazing audience, but it is also an “uncontrolled” environment so announcing a new product is not without risk and not without huge upside (Disclaimer: I’ve been part of several product announcements/interviews at this forum). Apple, along with many companies, has a tried and true approach to announcing new things as we will see next week.

What is most interesting about the forum, however, is that the format and depth of the dialog allows for a strong “how did we get here” or “how are you wrestling with challenges” discussion. This is not a one-way speech or a forum where talking points go unchallenged. That is in a sense what separates the men from the boys so to speak.

When speakers prepare for the interview, especially at larger companies, folks in communications prepare talking points, responses to tough questions, anecdotes, and even jokes. This is a forum where this can take on “Presidential debate” levels of preparation. The challenge is that everyone in the audience and certainly the interviewers are all well-versed in these techniques. For the presenters, all of that over-preparation cycles through your mind during the tough questions and unpredictable questions from the audience. This is a tough environment.

When speakers choose not to say anything of depth or the answer is clearly a prepared message, you can almost feel the energy in the room drain. There is a collective sense of a missed opportunity to learn more among attendees.

When speakers choose not to say anything of depth or the answer is clearly a prepared message, you can almost feel the energy in the room drain.

Too many people focus on CEOs evading questions about the next big deal or the features/availability of the next product. I don’t think that is a way to evaluate speakers and in almost all cases the interviewers ask a question like this one time often make a joke and move on.

Reporters have an obligation to ask or they look like they are not doing their job. Speakers have an obligation to acknowledge such a forward-looking, material statement and move on. There’s a big caveat to this and where I wanted to share my own learning, my own journey. I believe when it comes to challenges and strategy, CEOs specifically and companies in general can and should do more to inform the dialog. The way I would say this is that if there is something out there that everyone knows to be a fact and the speaker knows to be a fact and everyone knows everyone knows, then talk about it. By not talking about it, the conventional wisdom becomes the reality and the conventional wisdom is often wrong and always incomplete.

I have personally experienced this in the transition from Windows Vista to Windows 7. “Everyone” knew something was up with Vista and certainly Microsoft knew, but no one was saying anything. The result was a strong desire to know the next features of Windows, which was the only thing that folks knew to ask. It served no one to talk about the features of the next product but it also served no one to pretend everything was going well. I missed a big opportunity and looked foolish in a very early interview I did with a (now) re/code reporter. I followed the tried and true approach of the incumbent which is to say nothing, redirect, and so on. See several thousand words without saying anything appear here, from 6 years ago this week.

It turns out that in a world of global instant communication, transparency, open source, platform shifts, and so on that the story about the products, the strategy, and more can come to define efforts more than folks think. This isn’t always the case because business is a social science, but by and large what distinguishes the way the PC era evolved from the way the mobile era is evolving is a vast difference in the flow of information and pace of change. Corporate communications and the leadership approach need to adapt to this era. Recognizing this one thing we did on the above transition in Windows was start blogging about the “why” of the product long before the release, which to this day was a unique level of transparency (and also a huge challenge).

The generational change taking place now is challenging large companies more than ever before. Technology companies are seeing their investments and assets have faster lifecycles and shorter lifespans. They should address head on the challenges of these timescales and commitments. Business approaches are also being challenged and everyone knows this on all sides, but not talking about the challenges means everyone just assumes how things will evolve, and collectively everyone can’t be right.

These changes are also pushing and pulling customers more than ever before. As individual consumers we invest a little bit in a new phone or tablet and maybe a gadget and services here and there. Some of these pan out and some don’t. But large companies looking to define themselves in a new era of mobility, bring your own devices, cross-organizational boundaries, and cloud need much more information and a clearer understanding of what and why things have transpired like they have. Discussing the rationale behind choices provides much more context for customers making bets and allows a much more open dialog to compare and contrast choices. This goes way beyond features and gets to the strategy, learning from the past, direction for the future–it is a fine line.

It is too easy to fall back to wanting to know the next products and features. Companies still have secrets. That’s what defines a company relative to competition. As Jeff Bezos commented recently, “sure, I’d like to know Apple’s product roadmap”. To interpret the need for openness as a public roadmap or feature list misses the point—what was missing from the incumbent perspective was a view of what has transpired over the past 5 years and with that understanding a view of what could provide more understanding of how investments are moving forward.

The real question is if incumbents are going to change enough, fast enough, and in a sense disrupt themselves and do so with a clear understanding of what has transpired in the past few years. Or will they take on all the characteristics of “Innovator’s Dilemma” and operate hoping incremental change dampens any effect of big transitions will allow them to weather the storm and return to normal.

To see how significant this transition is, I think it is best to start with Mary Meeker’s always informative “Internet Trends 2014”. The complete report is available and so is the video. There were many interesting data points—the rise of China, the conversion of smartphones from feature phones, the move of OS platforms to Silicon Valley companies, messaging, and more. One slide that sums up the transition along with the challenge showed the growth of tablets relative to PCs with the title “Tablet Units = Growing Faster Than PCs Ever Did…+52%, 2013”.

Because business is a social science and because there are many ways to look at data, no doubt some will challenge this data or conclusions. In fact, IDC just revised their tablet numbers down. Some feel that Tablets are reverting to their role as “media consumption” or lightweight computing devices. That I’m writing this on a tablet (yes one with a keyboard, but one with LTE, 10 hour battery life, weighs nothing, B5 size, etc.) provides my own anecdote about where things are heading.

This growth will change. It might sputter and then increase. There’s no doubt tablets are overtaking notebooks in terms of unit volumes. They are definitely not taking over all notebook workloads. But that would be like saying the growth of email was irrelevant to word-processing because it ignores the growth of the pie and shift in total volume to the new technology. As Steve Jobs said on stage at this conference, the software will catch up. This is happening. Despite what people might think, large numbers of attendees had their tablets at the conference and they were being “productive”.

Just as mainframe companies attempted to point out the shortcomings of PCs as servers, pointing out the shortcomings of tablets is not helpful, especially as tablets continue to gain more and more features of laptops while maintaining their unique characteristics (lightweight, fanless, quality over time, connectivity, reliability, security, apps, etc.)

One more slide from Mary sets the context that dominated the divergence of incumbents and disruptors and that was the view of the market size of each generation of computing, “Each New Computing Cycle = >10x > Installed Base Than Previous Cycle.”

“More than just phones” might lump too many devices into the last data point for some wishing to make the point that things are not changing so much. Let’s be clear—many mainframes still run the most critical systems of the world (I was in a briefing with an insurance company last week that wanted to hire me because I happened to know PL/1!). Today’s laptops have massive utility that isn’t being replaced overnight and probably won’t ever be “replaced”. That’s the Innovator’s Dilemma argument that does not equip either product developers or customers to innovate and prosper during these cycle changes.

Once you get beyond the specifics of what is coming next, which no one should be obliged to answer at #codecon, the dialog that gets to the heart of what is going on is worth having. What was missed? What was learned? What was tried? What did you think of what was tried? What is being done differently? How are big technology changes being thought of in isolation? Relative to existing investments? What point of view does a company have? What led the new company to be formed? What is different about investments being made? How do customers cope with change?

These questions and how they were answered made for quite a contrast between incumbents and disruptors. If you’re interested in per-speaker reports or the full interviews for any of them, please see the re/code site. My intent is not to summarize the sessions but to reflect on the sessions through this lens of forward leaning versus backward looking.

Incumbents

The incumbents of Microsoft, Intel, Comcast and Wal-Mart had a common theme which is that they each face significant challenges in the technology platforms and business models that brought them wildly successful. At the same time, each in my view missed an opportunity to say how they intend to change. In a sense, each asked us to leap to a future with them in leadership but without the detail to support that assertion.

It is key to understand that it is incredibly important for an industry to have large and healthy players operating at scale. In many ways, the startups we love serve as disruptive R&D for larger players and a healthy M&A pipeline is critical for all as evidenced by some of the recent mega-deals and dozens of smaller ones all aimed at the long term evolution of core products.

It is incredibly important for an industry to have large and healthy players operating at scale

Yet, many investments, particularly in hardware and manufacturing, require billions of dollars that can only be made by large companies. Incremental improvements we come to take for granted such as doubling of capacity, improved batteries, thinner devices, more pixels, massive data centers, and so on can only come from huge scale and well-functioning large companies.

At the same time, one look at Meeker’s slide above and one can’t help but notice that these large companies come to define the cycles she represents. Is that a convenient way we recall changes or were strategic changes part of a causal relationship? Don’t be so quick to judge. There’s a significant amount of subtlety and nuance.

Let’s look at some of the specific speakers.

Microsoft’s Satya Nadella and Intel’s Brian Krzanich both sit in the hot seat (the red chairs that define the #codecon set) with the same question so it is worth considering them together—what happened with respect to mobile and tablets. Satya talked about wishing to have taken the bet to build hardware all the way, sooner. Intel talked about the challenges in manufacturing at 14nm, not having the right product relative to power and the need to do better at 10nm. Mossberg kicked off Brian’s interview with the observation that he’s using a laptop half as frequently and using ARM based products a great deal. In a moment of candor, Brian talked about how many at Intel wished that the march towards mobility would have stopped at Ultrabooks and that Intel lacked the right parts to do tablets, which many at Intel did not think tablets would break out beyond consumption. I felt Brian’s comments showed a good acknowledgement about why things didn’t happen. At the same time, collectively the view of a strategy in the near to medium term didn’t come through. In eerily similar approaches, both Intel and Microsoft looked to a future beyond phones and tablets to an internet of things or more personal computing as where they will see greater success. I left both of these sessions feeling there was more to be told about where things are right now and what will happen over the next year or two (again not the features but the strategy—Microsoft and tablets small and large, Intel and mobile or even Chrome and Android). It isn’t that nothing was said, it was that everyone knows where things are today and the speakers know everyone knows, and the upside to keeping things close to the vest seems minimal and equates to “go with the disruptors” at some level.

One must admit that the challenge faced by Wal-Mart’s Doug McMillon is even greater in this audience which has few Walmart regulars (note, I shop at Walmart). In particular, many in this crowd are on the leading edge of home delivery and uber-for-everything and so visiting stores is already a thing of the past. That said, so much of what was said about online commerce felt too much like an expected incumbent response. For example, the idea that the lines are blurring between ecommerce and retail or that it is really hard to measure ecommerce if a person looked up an item on their mobile device before coming to the store (I wondered if there really was a metric that tried to give credit internally to the ecommerce division if someone did that). Ultimately, Doug said “physical still matters and digital makes it more valuable”. Maybe, except the last morning of the show I ordered a wall mount for the Sonos speaker we received at the show (yes elite gifts are part of the elite show) and it beat me home. Yes that is a luxury good and more, but to put forward the notion that ecommerce is still an add-on to physical stores seemed tricky for me.

Comcast’s Brian Roberts not only faces the challenge of cord cutters represented in the audience or the prospects of dealing with questions on net neutrality, but also just the fact that a lot of people have a lot of less than positive feelings about the products and services Comcast offers. When you look at Comcast as an incumbent and consider things like Netflix, Hulu, cord cutting, and more as the disruptive force it is very tough to see the dialog Brian led as satisfying. My feeling was that there is a strong response to keep everything as it is, while putting forward a notion that things are improving. There was a long demonstration of the X1 cable box. Yet in the same session when questioned about net neutrality, Brian said that it is too bad that Netflix should pay a cost of doing business as he has to pay for cableboxes. I think that they love the cablebox (evidence, it seems to be an incredible headache to get cablecards and very costly to switch to TiVo and the rent for cable boxes is pretty high). The fact that they spent 10 minutes doing a demo on the new platform seemed to indicate that—yet the platform has none of the elements of a modern platform relative to apps or openness as was asked by an attendee. The responses to questions about net neutrality seemed to show a strong desire to avoid change while at the same time not acknowledging a changing world and changing needs of what is going on relative to connectivity. The overall dialog around Netflix seemed harsh to me and it failed to consider just how much more pleasant (and modern) Netflix is as a consumer than the X1 experience shown. Disclaimer: I have had really significant problems with Comcast in our new place and having never used them before; this is my first time as a customer. As I have no choice for video or broadband, one could say it is challenging for me to be totally objective.

Each also stuck to revealing little, defending the status quo, and offering a view of the future that is the same but better.

Each of these CEOs and companies have enormously challenging jobs and situations. Having shareholders demanding consistent quarter by quarter results, customers who do not really want change from these service providers but seek change elsewhere, and massive organizations to change all make for the potential of no-win interviews. Yet, each also stuck to revealing little, defending the status quo, and offering a view of the future that is the same but better. My own experience and learning would offer than when facing massive disruptive challenges, engaging in the dialog serves all parties better even though the normal school of thought for the incumbent is to double-down, stick to talking points, and only reveal challenges through the lens of opportunity.

Disruptors

Several CEOs represented the leading edge of disruption. It is super easy to be a fan of disruption and to look at all that is going well with these leaders just as it is easy to look at all the challenges the incumbents face. At the same time, these disruptions are also representative of a new level of frankness and openness about what they face or have faced.

More than the great work these leaders represent, I think it is important to look at how each is communicating and participating in a dialog. One might suggest that when these leaders are under pressure or face challenges of being disrupted they will start to take on the characteristics demonstrated above. I don’t think that is the case, simply because several of these leaders have already faced (or are facing) these challenges in their business. While clearly disruptors have less to lose, it is important not to lose sight of the fact that some of these represent large public companies (not mega cap, but large) and all represent very large customer bases from consumer to enterprise.

It was exciting to see these leaders head to the future, demonstrate a unique point of view, and engage in a two-way dialog about where things are going

For me, it was exciting to watch these interviews and how these leaders took on their own challenges. It was also exciting to see these leaders head to the future, demonstrate a unique point of view, and engage in a two-way dialog about where things are going.

Let’s look at some of these speakers.

Uber’s Travis Kalanick is arguably the most used and mission critical service for the attendees. The love for the service runs deep. Equally deep is the love for how Uber is taking on the government in the regulation of taxis and ride sharing (along with Lyft, an a16z portfolio company). At the same time, Travis faces a lot of questions about his aggressive style and reputation. He didn’t hold back, characterizing the task ahead at Uber as “a political campaign, and the candidate is Uber and the opponent is an asshole named Taxi.” OK, probably a bit colorful. What I loved was how he embraced even the disruption to his own business. After seeing a truly autonomous car from Google the night before we heard the CEO of Uber telling us that self-driving cars are the future, not drivers. Considering that Uber is a marketplace for drivers, this embrace of your own disruption is great to see.

Most people expected a characteristically polite interview by Softbank’s Masayoshi Son-san, but were treated to candor and aggressiveness, though in a very polite way. This would be consistent with the amazing success Softbank and Yahoo BB had in Japan ten plus years ago bringing amazing broadband and low prices to a market easily dominate by the goliaths like NTT (the most visible building from the Shinjuku train station is the DoCoMo tower). Son-san told the story of starting Yahoo BB and “how they had: No experience, No technology, No capital. Just anger.” This was a true disruptor story, much like Uber’s story of realigning city government only at a national scale. While it was not so challenging to be candid about WiMax, Son-san was super clear about the failed technological approach. He was clear about the intention to go after broadband in the US with the same zeal he went after it in Japan.

Salesforce and Workday (Marc Benioff / Aneel Bhusri) together offered an incredibly clear view of disruption at the enterprise software level. If there’s one interview to watch, I would suggest this one because it has so much relevance to how software is made and brought to market from two CEOs who made and brought to market software in a previous generation. These are CEOs learning from their experience who have also engaged the marketplace differently as disruptors. There were many statements that are starting to seem less and less “bold” but nevertheless remain monumentally disruptive: “in a few years no one will run business software on premises”, “I run the company from a smartphone”, “if you’re going to build a cloud app you need to start from a clean sheet of paper—there’s no way around it”, “incumbents are holding on to the past and basically trying to monetize it”, “90% of the company can do all of HR on a smartphone” and so on. There were many profound elements of the dialog that revealed the depth of the strategic and technological shift these leaders are both creating and have experienced. For example, there was a description of competing with an incumbent like SAP who would go to a customer, negotiate a $40M deal to “upgrade” and then wait two years to get the latest features or start to use a SaaS model and the new features just show up. Yes there’s a ton of complexity in there and yes it is horribly disruptive to how businesses operate, but so was the introduction of the PC, client/server (upon which that $40M upgrade was based) and more. Finally, the discussion about being in a “post-server” world resonated with me as I just don’t see it as viable for companies to be building out their own data centers and this session provided a lot of evidence as to what these vendors are doing to make that a realistic assertion. From a format perspective I love the adjacency of these two and wish a couple of the incumbents were paired together.

Dropbox’s Drew Houston brought innovation, competition, and regulatory oversight into focus with his interview. This is another service that many people in the room not only use but rely on and that brings with it a degree of comfort and also a challenge in that the audience knows a lot about the services represented. Not content to simply reiterate what was previously known and said about the company, Drew talked about the genuine frustration he represents as a cloud provider learning about the revelation that the NSA tapped into cloud based services. It would have been easy to lay low but instead made the quip that the “NSA doesn’t send a muffin basket and say welcome”.

Netflix’s Reed Hastings represents learning and the learning from disruption incredibly well and can also be chronicled in his own appearances in the hot seat. Sometimes we forget that Netflix has been a public company for 12 years, to the day of this interview! For many of us it seems like ancient history that we used to get plastic discs in the mail and then return them Monday morning. Netflix is famously known for having disrupted itself and not with grace while on a path to streaming and today’s Orange is the New Black. I found the discussion looking backwards to missed opportunities and disruption absolutely fascinating. Reed talked about how the team would discuss “managing to the point of feeling like your skin crawled” and making decisions that were unbelievably difficult. While given the success right now, perhaps it is less difficult to look backwards at the challenges faced and mistakes made. It was amazing to hear this level of candor. Reed was even candid about something he said just a short time ago about the high price of Netflix stock which he said at the time was too high and represented a euphoria. In contrast to Comcast, Reed was much clearer about the net neutrality issues are playing out—he used a great example of Comcast trying to charge at both ends (both for the consumer and the internet service) by talking about the flow of money through the system. He offered an operational view of “strong net neutrality”. Putting aside the specifics of the issue, the tone of looking forward, candor about the past, expression of a clear point of view, and a view of delivering new products and services along with the inherent risks and challenges comes across as modern and consistent with a new style of leadership.

What comes next?

It might be too easy to read this and conclude big companies are legacy and being disrupted and new companies disrupt, but that would ignore two things.

First, this is a moment in time. While some would say disruption is akin to physics and must happen, there are dominant companies that reinvent themselves. Few even recall that IBM was close to bankruptcy when it reinvented itself from one dominant company to another, albeit in a very different way. And that reinvention progressed through nearly 20 years and returned 7X the broad stock market overall during that time.

Second, companies that disrupt are themselves prone to disruption down the road. We haven’t seen this dynamic play out yet for the companies here (though Netflix might be one). There is also a great deal of learning about how to reinvent and avoid the risk of being locked into a strategy and execution. Google doing the unthinkable of shutting down services or Facebook acquiring very large scale indirect competitors or technology complements are examples of a new generation of leaders acting differently relative to the potential disruption of core businesses.

Nothing is quite inevitable in business, but the potential to fall into familiar patterns is high.

Nothing is quite inevitable in business, but the potential to fall into familiar patterns is high. This past week at #codecon demonstrated the challenges and approaches to the core risk of the technology industry. In technology, the only thing you really do is monetize the work of the past and deliver innovation to the future. How leaders approach this reality is an evolving skill and #codecon allows us all to witness this evolution firsthand.

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Every time the topic of tablets versus laptops (and or smartphones) comes up, we end up in another endless debate about scenarios, consumption, productivity, keyboards, mice, screen size, multitasking, and more. In every case the debate centers around the core uses of “PCs” today—and PC is in quotes because the PC itself is a remarkably flexible device that has morphed over the years into many form factors. People study run-rates and trends and try to predict the demise of one over another and so on.

Disruption

Every disruptive innovation shares (at least) two characteristics. First, the newly introduced technology is more often than not inferior in some key dimensions, while superior in some dimensions that in the current context seem to matter more. Second, despite much consternation, the technology being disrupted is almost certainly going to remain a vital part of the landscape in some form or another for quite some time—either simply because of the long tail of legacy or because it serves a function that is not replicated at all.

What changes, however, is where the emphasis takes place around an ecosystem and with a, usually, broader set of customers. The ecosystem is not a static world and it too plays a vital role in the transition. Where the ecosystem is investing is always a leading indicator of where the transition is heading.

We can look at transitions such as entertainment (theater, radio, film, TV, video, streaming) or transportation (horses, boats, trains, cars, planes) or even storage (removable, hard drives, USB, flash) as examples of where these traits are demonstrated. Computer user-interface moving from characters to GUI to touch shows these traits as well.

The introduction of the iPad, and the modern mobile OS (and smartphones) in general, shows many of these characteristics. The modern OS in combination with new hardware has many characteristics that separate it from the PC era including sealed case (non-extensible hardware), ultra-low power consumption, rich embedded graphics, touch user interface, app store, exclusively wireless connectivity, and more. This is the new platform which is where so much innovation in apps is taking place.

Here is where the debate starts—some of those features are either not valued or true limitations when compared to the vastly more capable PC model. There’s no doubt about that. It is just a fact. Not only does the PC have a wider range and more “powerful” hardware options, but it also benefits from 20 years of software that drives a vast array of processes, devices, workflows, and more. Tablet hardware is still immature relative to “PC standards” and apps do not seem to cover so many of the existing PC scenarios (even if they cover scenarios not even dreamed of or possible on PCs).

Hardware and Software

Two things are still rapidly changing that will account for a much broader transition from the dichotomy of tablet OR laptop today to a world where tablets with modern operating systems begin (or have begun) to replace many scenarios occupied by laptops.

We will soon start to see more innovation in tablets.

First, the hardware in tablets will benefit enormously from Moore’s law. While the pace of changes in smartphones (screen size, cpu, gpu, specs) has been faster than we have seen in tablets, my guess is we will soon start to see more innovation in tablets. In terms of both form factor and specs, tablets have been reasonably static since introduction. There are give or take two screen sizes and fairly modest spec bumps. My guess is that since the same vendors make both smartphones and tablets, the vast amount of energy has been focused on smartphones for now (just as when the PC industry shifted innovation from desktops to laptops and then swung back again to focus on all-in-ones). I suspect we will start to see more screen sizes for tablets and more innovation in peripherals and capabilities, along with specs that benefit from the rapid progress in Moore’s law.

Second, all the hardware innovation in the world isn’t enough to drive new scenarios or even more dramatic replacement scenarios. The amazing innovation in software on smartphones shows what can take place when developers of the world see potential and tap into the power of a new platform.

Two Examples

I wanted to offer two examples of where the transition to tablets has been surprisingly “behind the scenes” and really out of sight, but very interesting from a technical perspective.

Many of us find ourselves in the AT&T store all too often because we’re adding a line, replacing a phone, getting a new SIM or whatever. Over the past year or so, AT&T has aggressively rolled out iPads to replace the in-store PCs that were used for customer service. This is a massive software challenge. The in-store PCs had point of sale capability, bar code readers (for SIMs), and a large array of apps that drove the entire customer engagement (some of these apps ran Windows OpenStep believe it or not).

He kept telling me how frustrating it was to deal with the lack of capabilities of the new tools.

If you happened to visit the store during the early stages of the transition, you would have been able to sense the frustration with the account managers. There were many unfamiliar elements to the new apps on the iPads and worse there seemed to be many things that the desktop tools could do that the iPad apps could not. For example, I got caught trying to merge two accounts and the rep was forced to call the regional call center to do the work and while on hold he kept telling me how frustrating it was to deal with the lack of capabilities of the new tools. At the same time, the iPad had cool integration with portable bar code readers, the reps could easily show you what is on the screen to verify information (like picking a new phone number) and so on.

The transition is well underway now and I don’t think folks notice any more.

Today I spent a few hours with my friendly Comcast technician while he diagnosed something faulty with our cable signal. While he has a fancy signal meter, most of the work he does is actually adjusting things via a remote app on an iPad. Comcast technicians (as I learned, the ones in vans but not “bucket trucks”) were recently issued iPads. Sure enough during the visit he was on the phone to a central office and was saying “I have an iPad now and so without my PC I’m not able to get that measurement”.

The tech said, “I have an iPad now and so without my PC I’m not able to get that measurement”.

I was having flashbacks to the frustrated AT&T reps. Turns out this technician used to have a PC and ran the same software as the tech at the other end of the phone (and in the bucket trucks). They are moving techs to iPads because they do not have to carry chargers; they are more resilient when dropped; and the integrated Verizon connectivity all make for a far more convenient service tool. Plus things like entering the MAC address become much easier with bar code readers and the ability to use a much more agile form factor, as one example.

The conversation I had with a tech (always the anthropologist) was fun. He said they have a whole tracking and feedback process that helps them to prioritize what features the software folks need to add to the apps being used in the field. Turns out, I’m guessing, they built some pretty elaborate desktop software that did just about everything since it was used on the ground and in the data center, but they likely had little understanding of just what was used and how often. The creation of new apps will drive a new level of customer service and technician capabilities, even if there are some hiccups along the way.

Broader Implications

These two examples are hard core line of business tools. We’re seeing the same thing in the line of business tools used by folks at all sorts of companies big and small. The new generation of mobile-first SaaS tools make it far easier to create “documents” for sharing and collaboration, access business information, or participate in business services from CRM to accounting to benefits. The tools these are supplanting were developed over a decade and have tons of features and optimizations but lack the mobility and internet access that is so highly valued in a modern workplace. The transition will have some hiccups but is happening.

Along with these tools, so many of the tools for creation and production that are PC based on being reimagined and recast for modern work. We can see this revolution in Adobe’s work on photography for professionals with tablets, Paper and Penci from fiftythree, and of course the long list of productivity tools we talk about often on this blog. These tools do less, but they also do more. When combined with tablets and smartphones on modern platforms they enable a new view on the work and scenarios.

The characterization of tablets as “neither here nor there” or “in between tablet and a laptop” misses the reality that the modern nature of tablet platforms—both hardware and software—will drive innovation and subsequent transition for many many scenarios from traditional laptop platforms to tablet platforms. We’re in the middle period where this is happening—just as when people said cars were too expensive for the masses and would not be mainstream or when the GUI interface lacked the hardware horsepower and “keystroke productivity” to replace character based tools.

New hardware and new software will surface new capabilities and scenarios not previously possible (or imagined).

The traditional laptop will power hundreds of millions of endpoints for a very long time. But as the two examples here show, even in the most hardcore worlds where device integration meets custom software, there is a transformation and transition taking place. New hardware and new software will surface new capabilities and scenarios not previously possible (or imagined). It won’t be smooth and it won’t please everyone immediately, but it is happening–just as both of those same scenarios transitioned from character to GUI.

It really is about the software. That change is happening all around us.

Like this:

I was talking with a founder/CEO of an enterprise startup about what it is like to disrupt a sizable incumbent. In the case we were talking about the disrupting technology was losing traction and the incumbent was regaining control of the situation, back off their heels, and generally felt like they had fended off the “attack” on a core business. This causes a lot of consternation at the disrupting startup as deals aren’t won, reviews and analyst reports swing the wrong way, and folks start to question the direction. If there really is a product/market fit, then hold on and persevere because almost always the disruption is still going to happen. Let’s look at why.

Incumbent Reacting

The most important thing to realize about a large successful company reacting to a disruptive market entry is that every element of the company just wants to return to “normal” as quickly as possible. It is that simple.

Every action about being disrupted is dictated by a desire to avoid changing things and to maintain the status quo.

If the disruption is a product feature, the motion is figuring out how to tell customers the feature isn’t that important (best case) or how to quickly add something along the lines of the feature and move on (worst case). If the disruption is a pricing change then every effort is about how to “manage customers” without actually changing the price. If the disruption is a new and seemingly important adjacent product, then the actions focus on how to point out that such a product isn’t really necessary. Across the spectrum of potential activities, it is why the early competitive responses are often dismissive or outwardly ignore the challenger. Aside from the normal desire to avoid validating a new market entry by commenting, it takes a lot of time for a large enterprise to go through the work to formulate a response and gain consensus. Therefore an articulate way of changing very little has a lot of appeal.

Status quo is the ultimate goal of the incumbent.

Once a disruptive product gains enough traction that a more robust response is required, the course of action is almost always one that is designed to reduce changes to plans, minimize effort overall, and to do just enough to “tie”. Why is that? Because in a big company “versus” a small company, enterprise customers tend to see “a tie as a win to the incumbent”. Customers have similar views about having their infrastructure disrupted and wish to minimize change, so goals are aligned. The idea of being able to check off that a given scenario is handled by what you already own makes things much easier.

Keep in mind that in any organization, large or small, everyone is at or beyond capacity. There’s no bench, no free cycles. So any change in immediate work necessarily means something isn’t going to get done. In a large organization these challenges are multiplied by scale. People worry about their performance reviews; managers worry about the commitments to other groups; sales people worry about quarterly quotas. All of these worries are extremely difficult to mitigate because they cross layers of managers and functions.

As much as a large team or leader would like to “focus” or “wave a wand” to get folks to see the importance of a crisis, the reality of doing so is itself a massive change effort that takes a lot of time.

This means that the actions taken often follow a known pattern:

Campaign. The first thing that takes place is a campaign of words and positioning. The checklist of features, the benefits of the existing product, the breadth of features of the incumbent compared to the new product, and so on. If the new product is cheaper, then the focus turns to value. Almost always the campaign emphasizes the depth, breadth, reliability, and comfort of the incumbent’s offer. A campaign might also be quite negative and focus on a fear, compatibility with existing infrastructure, or conventional wisdom weakness of a disruptor, or the might introduce a pretty big leap of repositioning of the incumbent product. A good example of this is how on-premises server products have competed with SaaS by highlighting the lack of flexibility or potential security issues around the cloud. This approach is quick to wind up and easy to wind down. Once it starts to work you roll it out all over the world and execute. Once the deals are won back then the small tiger team that created the campaign goes back to articulating the product as originally intended, aka normal.

Partnership. Quite often there can be a competitive response of best practices or a third-party tool/add-on that appears to provide some similar functionality. The basic idea is to use someone else to offer the benefit articulated by a disruptive product. Early in the SaaS competition, the on-premises companies were somewhat quick to partner with “hosting” companies who would simply build out a dedicated rack of servers and run the traditional software “as a service”. This repotting plants approach to SaaS has the benefit that once the immediate crisis is mitigated, either the need to actually offer and support the partnership ends or the company just becomes committed to this new sales channel for existing products. Again, everything else continues as it was.

Special effort. Every once in a while the pressure is so great internally to compete that the engineering team signs up for a “one off” product change or special feature. Because the engineering team was already booked, a special effort is often something carefully negotiated and minimized in scope and effort. Engineering minimizes it internally to avoid messing up dependencies and other features. Sales will be specific in what they expect the result to do because while the commitment is being made they will likely begin to articulate this to red-hot customer situations. At the extreme, it is not uncommon for the engineering team to suggest to the sales organization that a consultant or third-party can use some form of extensibility in the product to implement something that looks like the missing work. The implications of doing enterprise work in a way that minimizes impact is that, well, the impact is minimized. Without the proper architecture or an implementation at the right level in the stack, the effort ultimately looks incomplete or like a one-off. Almost all the on-premise products attempting to morph into cloud products exhibit this in the form of features that used to be there simply not being available in the “SaaS version”. With enough wins, it is almost likely that the special effort feature doesn’t ever get used. Again, the customer is just as likely to be happy with the status quo.

All of these typical responses have the attribute that they can be ignored by the vast majority of resources on a business. Almost no one has to change what they are doing while the business is responding to a disruptive force. Large incumbents love when they can fend off competitors with minimal change.

Large incumbents love when they can fend off competitors with minimal change.

Once the initial wave of competitive wins settles in and the disruptive products lose, there is much rejoicing. The teams just get back to what they were doing and declare victory. Since most of the team didn’t change anything, folks just assume that this was just another competitor with inferior products, technology, approaches that their superior product fended off. Existing customers are happy. All is good.

Or is it?

Disruptor Persevering

This is exactly where the biggest opportunity exists for a disruptive market entry. The level of complacency that settles into an incumbent after the first round of victories is astounding. There’s essentially a reinforcing feedback loop because there was little or no dip in revenue (in fact if revenue was growing before then it still is), product usage is still there, customers go back to asking for features the same as they were before, sales people are making quota, and so on. Things went back to normal for the incumbent.

In fact, just about every disruption happens this way–the first round or first approaches don’t quite take hold.

Why is this?

Product readiness can improve. Obviously the most common is that the disruptive product simply isn’t ready. The feature set, scale, enterprise controls, or other attributes are deficient. A well-run new product will have done extensive early customer work knowing what is missing and will balance launching with these deficiencies and with the ability to continue to develop the product. In a startup environment, a single company rarely gets a second shot with customers so calibrating readiness is critical. Relative to the broader category of disruption, the harsh reality is that if the disruptor’s idea or approach is the right one but the entry into the market was premature, the learning will apply to the next entry. That’s why the opportunity for disruption is still there. It is why time to market is not always the advantage and being able to apply learning from failures (your own or another entry) can be so valuable.

Missing ingredient gets added. Often a disruptive product makes a forward-looking bet on some level of enterprise infrastructure or capability as a requirement for the new product to take hold. The incumbent latches on to this missing ingredient and uses it to create an overall state of lack of readiness. If there’s one thing that disruptors know, it is not to bet against Moore’s law. If your product takes more compute, more storage, or more bandwidth, these are most definitely short-term issues. Obviously there’s no room for sloppy work, but by and large time is on your side. So much of the disruption around mobile computing was slowed down by the enterprise issues around managing budgets and allocation of “mobile phones”. Companies did not see it as likely that even better phones would become essential for life outside of work and overwhelm the managed phone process. Similarly, the lack of high-speed mobile networks was seen as a barrier, but all the while the telcos are spending billions to build them out.

Conventional wisdom will change. One of the most fragile elements of change are the mindsets of those that need to change. This is even more true in enterprise computing. In a world where the average tenure of a CIO is constantly under pressure, where budgets are always viewed with skepticism, and where the immediate needs far exceed resources and time, making the wrong choice can be very costly. Thus the conventional wisdom plays an important part in the timeline for a disruption taking hold. From the PC to the GUI to client/server, to the web, to the cloud, to acceptance of open source each of these went through a period where conventional wisdom was that these were inappropriate for the enterprise. Then one day we all wake up to a world where the approach is required for the enterprise. The new products that are forward-looking and weather the negatives wishing to maintain the status quo get richly rewarded when the conventional wisdom changes.

Legacy products can’t change. Ultimately the best reason to persevere is because the technology products you’re disrupting simply aren’t going to be suited to the new world (new approach, new scenarios, new technologies). When you re-imagine how something should be, you have an inherent advantage. The very foundation of technology disruption continues to point out that incumbents with the most to lose have the biggest challenges leading through generational changes. Many say the enterprise software world, broadly speaking, is testing these challenges today.

All of these are why disruption has the characteristic of seeming to take a much longer time to take hold than expected, but when it does take hold it happens very rapidly. One day a product is ready for primetime. One day a missing ingredient is ubiquitous. One day conventional wisdom just changes. And legacy products really struggle to change enough (sometimes in business or sometimes in technology) to be “all in” players in the new world.

Of course all this hinges on an idea plus execution of a disruptive idea. All the academic theory and role-playing in the world cannot offer wisdom on knowing if you’re on to something. That’s where the team and entrepreneur’s intuition, perseverance, and adaptability to new data are the most valuable assets.

The opportunity and ability to disrupt the enterprise takes patience and more often than not several attempts, by one or more players learning and adjusting the overall approach. The intrinsic strengths of the incumbent means that new products can usually be defended against for a short time. At the same time the organization and operation of a large and successful company also means that there is near certainty that a subsequent wave of disruption will be stronger, better, and more likely to take hold simply because of the desire for the incumbent to get back to “normal”.